AFCA Cautions SMEs on Unregulated Lending Practices

AFCA, which provides free and independent dispute resolution services, has observed that some lenders catering exclusively to small businesses are not legally required to be AFCA members. This includes certain asset leasing companies and online or private equity lenders. Consequently, SMEs that secure loans from these non-member entities may find themselves without recourse to AFCA's dispute resolution services if issues arise.

In the 2025 financial year, AFCA closed over 2,000 small business complaints related to finance, with 21% of these cases falling outside its jurisdiction. A significant portion of these were due to the financial firms involved not being AFCA members, leaving affected businesses with limited options for resolving disputes.

Suanne Russell, AFCA's Lead Ombudsman for Small Business, emphasised the importance of SMEs verifying a lender's membership status before entering into agreements. She noted that the absence of AFCA membership could leave business owners vulnerable and without access to essential dispute resolution mechanisms.

AFCA is also encouraging lenders who are not currently members to consider joining the organisation. Membership would provide their clients with access to external dispute resolution services, thereby enhancing trust and confidence in their lending practices.

For small business owners, this advisory underscores the necessity of conducting thorough due diligence when selecting financial partners. Ensuring that a lender is an AFCA member can provide an added layer of security and support, safeguarding the business's interests in the event of financial disputes.